Dan Rowinski's Mobile Platform

By Dan Rowinski

Nokia jumps from burning platform straight into the arms of Microsoft

One of the world’s largest cell phone manufactures just kicked its mobile operating system to the curb.

No,
we are not talking about iOS. The iPhone is still kicking just fine, if
Apple’s fourth-quarter numbers are any indication. Android is not going
anywhere, and recent reports say that it is now the most-used mobile OS
in the world. I am not sure if you could ever fully kill BlackBerry,
even if you really wanted to. Even webOS just made a comeback.

We are talking about MeeGo.

What
is MeeGo? It is the software that runs high-end smart phones for Nokia,
a company that dominates the world cell phone market. That may come as
a surprise to the average American consumer for whom there are only
Apple, Android and everything else. Along with its Symbian platform,
Nokia ships almost half a billion phones everywhere in the world every
year.

But Nokia has two problems: Apple and Google.

“The
first iPhone shipped in 2007, and we still don't have a product that is
close to their experience,” said Nokia CEO Stephen Elop in a memo to
employees, published by tech blog Engadget.
“Android came on the scene just over two years ago, and this week they
took our leadership position in smart phone volumes. Unbelievable.”

The
memo, which is being dubbed the “burning platform memo,” will go down
as perhaps the most brutally honest memo from a CEO in the last five
years -- maybe the next five years, too. Elop starts it with the
scenario of an oil rig worker on a platform in the icy Atlantic Ocean.
The platform catches fire. The worker must decide if he is going to
stay on the platform or jump to the freezing sea below.

The worker jumps.

“Nokia,
our platform is burning,” Elop wrote. “We poured gasoline on our own
burning platform. I believe we have lacked accountability and
leadership to align and direct the company through these disruptive
times. We had a series of misses. We haven't been delivering innovation
fast enough. We're not collaborating internally.”

Now, Elop and Nokia have jumped as well.

Straight into the arms of Microsoft.

Nokia
has always had a software problem. Symbian is a difficult platform for
developers to work with and creates a product that is slower to the
market than other ecosystems. MeeGo was just never any good. Elop
laments in the memo that only one device from MeeGo was scheduled for
market in 2011. The company's application front, Ovi, is at the mercy
of its struggling operating systems and lack of developers. Elop says
that a mistake Nokia has made was trying to compete in the smart phone
fray on a device-by-device basis.

“And the truly perplexing
aspect is that we're not even fighting with the right weapons," Elop
wrote. "We are still too often trying to approach each price range on a
device-to-device basis. Our competitors aren't taking our market share
with devices; they are taking our market share with an entire
ecosystem. This means we're going to have to decide how we either
build, catalyze or join an ecosystem.”

On Friday, Nokia joined an ecosystem.
Microsoft CEO Steve Ballmer and Elop announced that Nokia would be
abandoning MeeGo in the high-end smart phone market and going with
Windows Phone 7.

It looks like, for the time being, Symbian
will survive in the medium-range smart phone market. Overall, though,
it looks like Nokia and Microsoft have joined arms in a game of “red
rover” in an attempt to keep each company from losing any more market
and mind share in the mobile sector. On paper it seems like a great
idea for both companies. Nokia is a hardware company with a software
problem. Microsoft is a software company with a hardware penetration
problem.

The partnership, which some speculate could turn into
a full-blown merger, is more than just Microsoft adding Nokia as
another manufacturer the way it does with Hewlett-Packard, Acer, LG and
others. In an open letter from Elop and Ballmer, the pair outlines how
the companies will work together.

The Ovi store will be
integrated into the Windows Phone 7 application store, Nokia’s map
technology (Ovi Maps) will now be the default service for Microsoft’s
search engine and Bing will also be the search engine to all Nokia
phones. The companies will also “collaborate on development, joint
marketing initiatives and a shared development road map to align on the
future evolution of mobile products.”

The problem facing Nokia
and Microsoft, outside of competition, is that neither company has done
anything really well in the mobile category recently. Nokia sells a lot
of phones, but, by Elop’s own admission, none of them have been very
good. Microsoft tossed its old mobile operating system and started
fresh with Windows Phone 7, but as of last month it had little market
traction. There is no doubt that the Nokia/Microsoft deal will increase
sales of Windows Phone 7 but can it truly become the third major player
in the smart phone market?

That is a good question and brings up
an interesting point. Who really owns third? Apple is undoubtedly on
top in the popular vote. Android now has the most market share. Then
there are BlackBerry, HP with webOS and Nokia/Microsoft.

My
guess, for what it is worth, is that BlackBerry goes back to the niche
from which it came – enterprise and government with good yet decreasing
consumer sales. That leaves the battle between HP and Nokia/Microsoft.
It is an interesting matchup. HP has always been a great hardware
company that had to buy software (Palm) to make any inroads into
mobile. That is much the case between Nokia and Windows.

What
it will really come down to is a battle of ecosystems. In that case,
Elop was dead right. Apple and Android have beaten Nokia with
ecosystems – armies of developers working to create applications for
their platforms. Who will build the better app store? Microsoft has its
own legion of developers, so it looks like it gets the head start. Can
HP use what is seen as a superior OS to rapidly build its own
application environment?